Central Bank Digital Currency

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A Central bank digital currency (CBDC) is a cryptocurrency or other digital currency issued by the central bank of a jurisdiction. At the time of this entry (January 2020), CBDCs had been heavily discussed but not yet realized anywhere.

In early 2020 the Bank for International Settlements (BIS) joined with the Bank of Canada, the Bank of England, the Bank of Japan, the European Central Bank, the Swedish Riksbank and the Swiss National Bank to share their assessments of and experiences with potential use cases for central bank digital currencies.[1] BIS surveys central banks' interest in cryptocurrencies. and in January 2020 it reported results coveriong 66 central banks, 80% of which are engaged in CBDC activities. 40% of the respondents are engaged in experiments or proofs of concept and another 10% of them had launched pilot projects.[2]

In January 2020, the World Economic Forum published a framework for central banks addressing the benefits and risks of CBDCs. The "CBDC Policy-Maker Toolkit" includes 28 pages of information about the retail sale of digital currencies, cross-border CBDCs, and "hybrid" CBDCs. "Hybrid CBDCs" refers to privately-created and managed digital assets tied to monetary reserves. The document includes cost-benefit analyses, current regulatory and other CBDC challenges, and other important factors deemed necessary to consider before adopting a CBDC. The Toolkitasserts that CBDCs can reduce the costs associated with cross-border payments, although, only in countries currently without efficient systems. CBDCs may not add much value. More than 40 banks, academic researchers, and financial institutions joined in the production of the Toolkit.[3][4]